Debt, Can We Live Without It?

Debt allows for the borrower to use the money to buy things that they would not have been able to afford but debt can be recovered through common law action.

The highlighted terms above are very important and we will focus on them in trying to find out whether personal debt is always the answer or could it be avoided.

Borrows Money

Why do we borrow money? To buy stuff most will say.

If you go into an electrical shop and buy a large screen TV on credit then you have borrowed money to buy ‘Stuff’.

The electrical company usually does not give you the credit, there is another company usually a bank of some sort that pays the electrical company the price of the TV and a thank you fee on top and they (Bank) get back their money from you (fingers crossed).

So the question is could you have avoided this debt by saving and buying the TV Cash?

You can save £84 a month and buy this TV in a year for cash and you will be guaranteed it will be cheaper and if you are savvy and go for it during the black Friday bonanza weekend you can get if for less.

Meaning you could only need to save for a fraction of the amount.

If you buy this TV on credit you could pay £70 over 24 months to get the same TV.

If you can afford £70 why not add £14 more a month and you could even buy the TV in less than 12 months.

This example shows that sometimes we rush to borrow money to buy things when actually we could get them in the near future a fraction of the cost.

Promises To Pay At A Later Date

A debt comes attached with an agreement to pay it back at a promised date.

When borrowing money make sure that you will be able to afford the repayments at that time.

Most people realise that a big purchase on credit during the Christmas period becomes unaffordable after the festive season when the credit card bills pile up.

Buy the Christmas gifts using cash and try to buy the presents earlier to avoid panic or impulse buying or even yielding to pester power.

Try giving people gifts cards so they have a choice and you do not feel the pressure to buy them something big.